Consumer confidence bounced back sharply from a revised 40.9 in October to 56.0 in November. Today’s report echoes the improvement in the Michigan Consumer Sentiment Index for the month and represents the strongest monthly increase since April 2003.
While this reversal is a positive development, confidence levels remain exceptionally low. Even nearly two-and-a-half years after the recession ended, confidence remains well below where it was at the start of the recession in 2007 and has generally trended lower throughout the course of the past year.
It’s not a coincidence that the recent peak in confidence came early this year as job creation appeared to be picking up and the economy was hinting at some better momentum. Those hopes were quickly dashed in the months that followed, as that improvement proved fleeting.
More recently, economic data has again been coming in better than anticipated. That wasn’t lost on consumers, as the survey indicated that consumers had a slightly brighter view of business conditions, job creation, and income growth in the months ahead than had been the case in recent months.
Looking forward, consumers remain in treacherous waters, threatened by the crashing waves of high unemployment, low wage growth, housing prices that are falling anew, and rising recessionary risks.
Consumers may be able to shrug off those risks in the near-term. Black Friday sales were successful this year, with spending up over the four-day holiday weekend by 16%, according to a survey by the National Retail Federation. With confidence building, it’s quite possible that they may keep their wallets open through the end of the year, which would be a big positive for retailers and would provide a boost to fourth quarter growth.